MYOB data points to pause in small business hiring

MYOB's latest data point to a pause in small-business hiring in Australia, a trend that could influence national labour force figures because SMEs employ 39% of the private-sector workforce.

Data from MYOB's SME Performance Indicator, based on transaction activity across more than 200,000 Australian SMEs, showed activity growth of 0.6% in the March quarter and 4.1% over the year. Growth eased through March, however, as consumer spending softened and global uncertainty increased.

Employment growth remained positive overall in the March quarter, but rising wage costs continued to squeeze margins. As a result, many smaller businesses focused on preserving stability rather than expanding headcount.

Separate findings from the May edition of MYOB Business Monitor pointed in the same direction. The survey of more than 1,000 SME owners and operators found that 5% planned to increase full-time headcount over the next 12 months, while 11% expected to reduce it and 79% forecast no change.

The figures suggest smaller businesses are unlikely to make a meaningful positive contribution to near-term employment growth. They also indicate that any shift in labour demand may be concentrated in specific parts of the market rather than spread across the wider SME base.

Hiring outlook

MYOB's data also pointed to softness in casual and part-time work. Fourteen per cent of SMEs said they expected to reduce casual or part-time headcount, compared with 8% planning to increase it, indicating weaker hours worked even if headline employment remains steady.

Labour costs are still rising. Seventeen per cent of SMEs said they expected to increase pay, with that share rising to 35% among businesses with five to 19 employees and 44% among medium-sized businesses with 20 to 199 employees.

The combination of slower hiring and higher wages is adding pressure to margins, especially for firms facing weaker customer demand. It also highlights a divide between employment intentions and pay expectations, with many businesses preparing for higher staffing costs without taking on more workers.

Not all sectors are moving in the same direction. The SME Performance Indicator showed that Property Services, Professional Services, and Mining led activity in the first quarter, while Retail Trade, Hospitality, and Health recorded the most difficult conditions.

The divergence suggests labour conditions may vary sharply between industries. Businesses tied to discretionary consumer spending appear to be under more strain than those in service and resource-linked sectors, where activity has held up better.

Scale divide

The data also indicated that larger employers within the SME category were more willing to add staff. Medium-sized businesses with 20 to 199 employees planned to increase full-time headcount by 21%, four times the rate across the broader SME sector.

That points to a market where employment growth, where it exists, is likely to come from firms with more scale rather than the smallest operators. Smaller businesses often have less room to absorb rising wage bills or periods of slower sales, making them more cautious about recruitment.

Kim Owen Jones, General Manager of SME at MYOB, said the numbers suggested a broad pause in hiring intentions across the sector.

"The ABS numbers are likely to confirm that small business hiring has paused. Thursday's ABS figures are likely to reinforce what small businesses are already telling us: hiring has moved into a holding pattern, with many SMEs choosing stability over expansion.

"Businesses entered 2026 with a solid base, but momentum softened through the March quarter as demand eased and operating costs remained elevated. When the economic landscape keeps fluctuating, owners are understandably more cautious about adding headcount," Jones said.

She said the softer hiring picture should not be read as a collapse in confidence across the sector. Instead, the data showed businesses adapting to weaker demand and tighter margins while trying to protect their underlying operations.

"This doesn't point to a lack of resilience. It reflects a more defensive operating environment. Small businesses are still focused on growth, but for many, the priority right now is protecting margins, improving productivity and waiting for greater certainty before making new hiring decisions.

"Stronger business confidence, policy certainty and continued investment in digital capability will all be important in helping SMEs manage costs and return to a more confident hiring outlook," Jones said.